2nd Avenue [2001] QBCCMCmr 494 (5 September 2001)

P J HANLYREFERENCE: 0371-2001

ORDER OF AN ADJUDICATOR

MADE UNDER PART 10 OF CHAPTER 6

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

Number of Scheme:	5755
Name of Scheme:	2nd Avenue
Address of Scheme:	C/- Body Corporate Services Pty Ltd Level 1 45 Nind Street SOUTHPORT QLD 4215

TAKE NOTICE that pursuant to an application made under the abovementioned Act by

Daymall Pty Ltd, the service contractor and letting agent for 2^nd Avenue



I hereby order that, within 14 days of the date of this order, the applicant shall pay the sum of $34,980.00 by way of transfer fee to the body corporate.





STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0371-2001

“2nd Avenue” CTS 5755

The applicant, Daymall Pty Ltd, the service contractor and letting agent for 2^nd Avenue, has sought the following order of an adjudicator under the Body Corporate and Community Management Act 1997 (the Act), quote -

That pursuant to section 83(6) of the Body Corporate and Community Management (Accommodation Module) Regulation 1997 the body corporate may not require the payment of the relevant amount under section 83 of the Regulation Module on the grounds that Daymall Pty Ltd sought approval to the transfer on the basis of genuine hardship not reasonably foreseeable by the transferor at the contract date. Further, if it is determined that the relevant amount is payable, the relevant amount is calculated without reference to the value of plant, equipment and other chattels used by Daymall Pty Ltd in the operation of its business so that the relevant amount would be $34,980.00.

Section 223(1) of the Act provides that an adjudicator may make an order that is just and equitable in the circumstances (including a declaratory order) to resolve a dispute, in the context of a community titles scheme, about –

a) a claimed or anticipated contravention of the Act or the community management statement; or

b) the exercise of rights or powers, or the performance of duties, under this Act or the community management statement; or

c) a claimed or anticipated contravention of the terms, or the termination of, or the exercise of rights or powers under the terms of, or the performance of duties under the terms of an engagement contract or an authorisation contract.

An order may require a person to act, or prohibit a person from acting, in a way stated in the order (section 223(2)). An adjudicator’s order may contain ancillary or consequential provisions the adjudicator considers necessary or appropriate (section 230(1)).

In the supporting grounds, the applicant provided background to the application, and concluded as follows:

The diagnosis of cancer and deterioration of Pat’s health, the arthritis that manifested itself in Jean’s right foot (and became worse) and the stress caused by the constant spate of burglaries that also lead to Caroline’s resignation are things that were not, and could not have been, reasonably foreseeable by Daymall and the McDonalds at the date the agreements were entered into, January 28 2000. Those things all constitute genuine hardship that lead to Daymall having to sell the management rights and transfer its interest in the agreements.

The body corporate committee was invited to respond to the application. Submissions were received from the chairperson and from two committee members. All opposed the application. A submission was also received from the body corporate manager, who similarly opposed the application.

The applicant replied to the submissions, and provided further detail to support the claim of genuine hardship.

Section 102 of the Act provides that there is to be no consideration payable to a body corporate for the engagement or authorisation of service contractors and letting agents. No party has suggested to the contrary, and I therefore find that no such consideration has been paid. Accordingly, by virtue of section 107(2), the provisions of section 107(3) are applicable to this matter. This section relates to the payment of an amount to the body corporate by the service contractor or letting agent if any rights under the relevant instrument appointing or authorising such a person are transferred within a specified period prescribed under the regulation module. Thus one turns to section 83 of the Accommodation Module.

Section 83 of the Accommodation Module becomes applicable to the engagement of a person as a service contractor or the authorisation of a person as a letting agent provided certain specified pre-requisites set out in section 83(1) are satisfied, which I find to be the case in this matter. As the applicant has sought the body corporate’s approval to the transfer of the management and letting rights within three years after the date on which the engagement and authorisation was entered into, sections 83(2), (3), (4) and (5) are applicable.

It is the applicant’s contention that section 83(6) of the Accommodation Module is also applicable to its circumstances, in that it has been forced to sell the management rights, the letting rights and the unit as a result of the ill-health of Mr and Mrs McDonald (Mrs McDonald being the sole director of the applicant), and their daughter Carolyn McDonald, all of which was not reasonably foreseeable at the time that the applicant signed the new management and letting agreements on 28 January 2000. It is further contended that the sale in such circumstances has caused genuine hardship to the applicant.

Whilst there appears to be no judicial determination of the meaning of the express term “genuine hardship”, the definition of “hardship” as that word relates to various Australian legislation, has appeared in a number of decisions. In Re Kabalan [1993] FCA 76; (1993) 113 ALR 330, Gummow J, when reviewing the Bankruptcy Rules (Cth), defined “hardship” as “...any condition which presses with particular asperity upon a person...”. This was also considered an appropriate definition by the Full Tribunal of the A.A.T. in Re Dorevitch Pathology and Minister for Health [1993] AATA 377; (1993) 32 ALD 170 at 177 (paragraph 17). In Re Qld Medical Lab. and Dept. of H.H.C.S. (1994) 33ALD 159 at 167 (paragraph 32) the Full Tribunal of the A.A.T., when considering the word “hardship” as it appeared in the Health Insurance Act 1973 (Cth) ruled that “the term ‘hardship’ can potentially cover a broad spectrum of connotations including meaning an appreciable detriment whether it be financial, personal or otherwise.”

All of the authorities indicate that each case must depend on its own particular facts and circumstances.

At the committee meeting held on 24 November 1999, various questions were put to Mr and Mrs McDonald and Carolyn McDonald (the management team). The pertinent part of the interview revealed that the manager (Daymall Pty Ltd) proposed to have a “hands on” approach; proposed to employ staff to help out in the front office and proposed to have one of the management team residing in the manager’s lot at all times.

The statement of Patrick McDonald dated 9 August 2001 included the following information:

Apart from supervising the gardening and cleaning staff of the body corporate, I did carry out a number of small maintenance and repair jobs on an almost daily basis. I saw this role as part of the role of Daymall Pty Ltd as overall manager at the complex even though there was no specific requirement on Daymall Pty Ltd to carry out that work. Some of those things included unblocking the garbage chute and stomping down on rubbish in the large bin. I also carried out small repair and maintenance type jobs and attended to the changing of light bulbs. I cleaned up any “accidents” from young children in the pool.

Apart from this work, I was also employed by the body corporate to carry out cleaning and grounds work on weekends and other occasions during the week. In all I was paid for approximately 20 hours work per week. That involved the cleaning of the refuse rooms on 30 floors on the weekends, the cleaning of the two pools, two spas, two sauna rooms, two toilets, three barbecues and the common area grounds each Sunday.

I accept that the re-emergence of Mr McDonald’s cancer may not have been reasonably foreseen. I further accept Dr Josephson’s opinion, expressed in his report dated 9 April 2001, that the effects of the cancer treatment and the stress of running the business have taken their toll, and that Mr McDonald should retire to allow his health to improve. However, Mr McDonald admitted that there was no specific requirement for him to carry out the small maintenance and repair jobs that he used to carry out around the scheme. Furthermore, the approximately 20 hours work, for which he was paid by the body corporate, could obviously have been carried out by another person, without any financial impact on the applicant.

In Mrs McDonald’s case, the medical evidence is that she is suffering from a medical condition, which severely affects her working capacity. This medical condition has been diagnosed as osteoarthrosis in the right foot (see radiology report dated 22 February 2001). I note that she visited her doctor on 4 occasions over a 12-month period for this condition, which does not seem excessive. There is no evidence that she cannot work altogether as a result of this condition. At the committee meeting held on 24 November 1999, the committee was advised that staff would be employed to help out in the front office. There appears to be no reason that Mrs McDonald could not have carried out her duties with the assistance of employed staff.

As to Carolyn McDonald, it is suggested that she resigned because of the stress of the numerous burglaries, which had taken place at the scheme over a 12-month period. There is no statement from Carolyn McDonald to support this contention. Her letter of resignation does not provide a reason for her decision. When she attended the committee meeting on 4 May 2001, she did not give a reason for her resignation. Whilst I have no doubt that the regularity of break-ins at the scheme might have caused some stress, there is insufficient evidence to satisfy me that Carolyn McDonald’s resignation was brought about by the stress of the break-ins alone, or indeed at all. In any event, as the office had been fully computerised by the time that Carolyn tendered her resignation, the requirement for additional staff should certainly have been less than it had been at the commencement of the management, and would perhaps have been accommodated by the employed staff which the applicant envisaged engaging during the interview with the committee on 24 November 1999.

Finally, I note that the applicant has not contended that it made a financial loss on the sale and the material available to me reveals that the sale price of the management and letting rights was certainly higher than the purchase price paid by Daymall a little under eighteen months earlier.

In all of the circumstances, I am not satisfied that there has been appreciable detriment to the applicant or that there is evidence of genuine hardship such as to justify the waiver of payment of the relevant amount on the fair market value of the transfer. I note that the committee has agreed to accept the amount of $34,980.00, and I have ordered accordingly. 2n